EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into by
and between Safety Components International, Inc., a Delaware corporation (the
"Company"), and Xxxxxx X. Xxxxxxxx ("Employee") and is dated as of the 19th day
of May, 1997.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee as its
Executive Vice President and Chief Operating Officer; and
WHEREAS, Employee desires to accept such employment upon the
terms set forth in the Agreement.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
adequacy and receipt of which is hereby acknowledged, the parties agree as
follows:
1. Employment. The Company hereby employs Employee and
Employee hereby accepts employment with the Company, commencing as of May 19,
1997 (the "Effective Date"), for the Term (as defined below), in the position
and with the duties and responsibilities set forth in Section 3 below, and upon
the other terms and subject to the conditions hereinafter stated.
2. Term. Except as otherwise specifically provided in Section
7 below, the term of the Agreement (the "Term") shall commence on the Effective
Date and shall continue until the third (3rd) anniversary of the Effective Date,
subject to the terms and conditions of the Agreement.
3. Position, Duties, Responsibilities and Services; No
Violation
3.1 Position, Duties and Responsibilities. During the Term,
Employee shall serve as Executive Vice President and Chief Operating Officer of
the Company and shall be responsible for the duties attendant to such offices,
which duties will be generally consistent with his position as an executive
officer of the Company, and such other managerial duties and responsibilities
with the Company, its subsidiaries or divisions as may be assigned by the
Company's Chief Executive Officer or the Board of Directors of the Company (the
"Board"). Employee shall be subject to the supervision and control of the
Company's Chief Executive Officer and Board and the provisions of the By-Laws of
the Company.
3.2 Services to be Provided. During the Term, Employee shall
(i) devote at least eighty percent (80%) of his working time, attention and
energies to the affairs of
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the Company and its subsidiaries and divisions, (ii) use his best efforts to
promote its and their best interests, (iii) faithfully and diligently perform
his duties and responsibilities hereunder, and (iv) comply with and be bound by
the Company's operational policies, procedures and practices as are from time to
time in effect during the Term. It shall be understood that, during the Term,
Employee shall devote the remaining portion of his working time, attention and
energies (not to exceed twenty percent (20%) to the affairs of Valentec
International Corporation ("Valentec") as its Executive Vice President and Chief
Operating Officer; provided, however, that the Company may at any time in its
sole discretion terminate this provision and require that Employee devote one
hundred percent (100%) of his working time to the Company. The Agreement shall
not be construed as preventing Employee from serving as an outside director of
any other company or from investing his assets, in each case, to the extent that
it does not require a material amount of his time and, in each case, subject to
the non-competition obligations contained in Section 9 below.
3.3 No Violation. Employee represents and warrants to the
Company that the execution, delivery and performance of the
Agreement by Employee will not breach, violate, conflict with, or cause a
default under, any other agreement to which he is a party. Notwithstanding
anything to the contrary contained herein, the representation contained in the
preceding sentence shall survive any termination or expiration of the Agreement.
4. Compensation.
4.1 Base Salary. Employee shall be paid a base salary ("Base
Salary") at an annual rate of two hundred and thirty-five thousand dollars
($235,000) per year, payable at such intervals as the other executive officers
of the Company are paid, but in any event at least on a monthly basis. The Base
Salary shall be reviewed by the Board on or before April 1 (the first day of the
fiscal year of the Company) of each year during the Term, based upon
recommendations of the Company's Chief Executive Officer, with such reviews to
commence in 1998, and shall be subject to increase in the sole discretion of the
Board, taking into account the recommendation of the Company's Chief Executive
Officer, merit, corporate and individual performance and general business
conditions, including changes in the cost of living index. Any such increase
shall be retroactive to the anniversary of the Effective Date immediately
preceding such review.
4.2 Bonus Compensation. Employee shall also be eligible for an
annual performance-related bonus ("Bonus Compensation") commencing with the
Company's fiscal year ended March 31, 1998 (the "1998 Fiscal Year"). For the
1998 Fiscal Year, the Company shall pay Employee Bonus Compensation of a minimum
of fifty thousand dollars ($50,000). The Bonus Compensation of Employee, if any,
for each fiscal year of the Term, including any amount in excess of the $50,000
minimum amount for the 1998 Fiscal Year, shall be determined by the compensation
committee of the Board ("Compensation Committee"), in its sole discretion,
taking into account the recommendation of the Company's Chief Executive Officer,
and may be paid in cash and/or capital stock of the Company in the sole
discretion of the Board. Bonus
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Compensation shall be based upon the achievement of certain numerate and
non-numerate performance objectives to be established for each fiscal year which
entitle Employee to Bonus Compensation targeted at fifty percent (50%) of the
Base Salary of Employee. The Company shall pay the Bonus Compensation to
Employee, if any, for each fiscal year of the Term within thirty (30) days of
the completion by the Company's accountants of their audit of the Company's
financial statements for such fiscal year.
4.3 Stock Options. On the Effective Date, the Company hereby
agrees to cause the issuance to Employee of stock options ("Stock Options") to
purchase shares of common stock, $.01 par value, of the Company ("Common Stock")
as follows: Stock Options to purchase 225,000 shares of Common Stock to be
issued on the Effective Date ("Base Stock Options"). Employee will also be
eligible for consideration of additional stock options during each year of the
Term, as determined by the Compensation Committee, in its sole discretion
("Additional Stock Options"). All Base Stock Options and any Additional Stock
Options shall be issued pursuant to, and in accordance with, the Company's 1994
Stock Option Plan (the "Plan"). The issuance of the Base Stock Options shall be
subject to approval of the Shareholders of the Company. The Company shall submit
for approval of its Shareholders at the next annual meeting of Shareholders of
the Company, any increase in the shares authorized under the Plan as may be
necessary for issuance of the Base Stock Options to be granted hereunder. The
maximum number of Base Stock Options shall be qualified stock options under the
Plan as would not cause a disqualification under applicable Internal Revenue
Code Sections or regulations thereunder, and the remainder of Base Stock Options
shall be non-qualified stock options under the Plan. Each Base Stock Option
shall be exercisable at a price equal to the Fair Market Value (as defined in
the Plan) of the Common Stock on the date of issuance of such Base Stock Option
(or if such date is not a business day, then such option shall be exercisable at
a price equal to the Fair Market Value on the next business day following such
date) in accordance with the terms of the Plan and shall vest over a three year
period from the date of grant at a rate of 331/3% per year, commencing with the
first anniversary of the date of grant. Employee's vested Base Stock Options
shall be exercisable for a period of ten years from the date of issuance. Upon
the termination of the Agreement, any unvested Base Stock Options shall lapse,
except as otherwise provided in Section 7 below, and Employee shall have ninety
(90) days from the date of termination of his employment with the Company, for
any reason, to exercise any vested Base Stock Options (one year in the case of
termination by reason of death or disability of Employee).
5. Employee Benefits.
5.1 Benefit Programs. During the Term, Employee shall be
entitled to participate in and receive benefits generally made available now or
hereafter to executive officers of the Company under all benefit programs,
arrangements or perquisites of the Company including, but not limited to,
pension and other retirement plans, including a 401(K) plan, hospitalization,
surgical, dental and major medical coverage and short and long term disability
benefits.
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5.2 Vacation. During the Term, Employee shall be entitled to
four (4) weeks vacation with pay during each year of his employment hereunder
consistent with his position as an executive officer of the Company (pro-rated
as necessary for partial calendar years during the Term); provided, however,
that the vacation days taken do not interfere with the operations of the
Company. Such vacation may be taken, in Employee's discretion, at such time or
times as are not inconsistent with the reasonable business needs of the Company.
Employee shall not be entitled to any additional compensation in the event that
Employee, for whatever reason, fails to take such vacation during any year of
his employment hereunder. Employee shall also be entitled to all paid holidays
given by the Company to its executive officers.
5.3 Life Insurance. Subject to the availability on
commercially reasonable terms, during the Term, the Company shall maintain in
effect and pay the premiums for a term life insurance policy covering Employee
in an amount equal to two million dollars ($2,000,000) (the "Life Insurance
Amount"), the beneficiary of which shall be designated by Employee.
5.4 Automobile. During the Term, the Company will provide
Employee with an automobile allowance of $1,200 per month for all expenses
relating to the insurance, maintenance and operation of Employee's automobile.
5.5 Country Club Membership. During the Term, the Company
will, promptly following the submission of documentation reasonably satisfactory
to the Company, reimburse Employee for annual membership and associated fees
paid by Employee during such fiscal year in the so-called "Xxxxxx Ranch" country
club, or another equivalent country club.
6. Expenses. Upon submission by Employee of a xxxx from his
previous employer, the Company shall deliver to Employee's previous employer a
check made payable to such employer in the approximate amount of fifty-five
thousand dollars ($55,000), in order to repay advances received by Employee for
relocation and temporary living expenses. During the Term, the Company shall
reimburse Employee upon presentation of appropriate vouchers or receipts and in
accordance with the Company's expense reimbursement policies for executive
officers, for all reasonable travel and entertainment expenses (other than
automobile expenses) incurred by Employee in connection with the performance of
his duties under the Agreement.
7. Consequences of Termination of Employment.
7.1 Death. In the event of the death of Employee during the
Term, Employee's employment hereunder shall be terminated as of the date of his
death and Employee's designated beneficiary, or, in the absence of such
designation, the estate or other legal representative of the Employee
(collectively, the "Estate") shall be paid, in addition to any life insurance
proceeds pursuant to Section 5.3 above, Employee's unpaid Base Salary through
the month in which the death occurs and any unpaid Bonus Compensation which is
set forth in this Agreement or thereafter approved by the Company's Board
(taking into account the
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recommendation of the Company's Chief Executive Officer) for any fiscal year
which has ended as of the date of such termination or which was at least one
half (1/2) completed as of the date of death. In the case of such incomplete
fiscal year, the Bonus Compensation shall be pro-rated and all such Bonus
Compensation payable as a result of this Section 7.1 shall be otherwise payable
as set forth in Section 4.2 above. The Estate shall be entitled to all other
death benefits in accordance with the terms of the Company's benefit programs
and plans.
7.2 Disability. In the event Employee shall be unable to
render the services or perform his duties hereunder by reason of illness, injury
or incapacity (whether physical, mental, emotional or psychological) for a
period of either (i) ninety (90) consecutive days or (ii) one hundred eighty
(180) days in any consecutive three hundred sixty-five (365) day period, the
Company shall have the right to terminate this Agreement by giving Employee ten
(10) days' prior written notice. If Employee's employment hereunder is so
terminated, Employee shall be paid, in addition to payments under any disability
insurance policy in effect, Employee's unpaid Base Salary through the month in
which such termination occurs, plus Bonus Compensation on the same basis as is
set forth in Section 7.1 above.
7.3 Termination of Employment of Employee by the Company for
Cause. Nothing herein shall prevent the Company from terminating Employee's
employment under the Agreement for Cause (as defined below). In the event
Employee is terminated for Cause, Employee shall be paid his unpaid Base Salary
(but no Bonus Compensation) through the month in which such termination occurs.
The term "Cause" as used herein, shall mean (i) Employee's willful misconduct,
material dishonesty or fraud in the performance of his duties hereunder, (ii)
the continued failure or refusal of Employee (following written notice thereof)
to carry out any reasonable request of the Company's Chief Executive Officer or
Board for the provision of services hereunder, (iii) the material breach of the
Agreement by Employee or (iv) the entering of a plea of guilty or nolo
contendere to, or the conviction of Employee of, a felony or any other criminal
act involving moral turpitude, dishonesty, theft or unethical business conduct.
For purposes of this Section 7.3, no act or omission shall be considered willful
unless done or omitted to be done in bad faith and without reasonable belief
that such act or omission was in the best interest of the Company.
Termination of employment of Employee pursuant to this Section
7.3 shall be made by delivery to Employee of a letter from the Board generally
setting forth a description of the conduct which provides the basis for a
termination of employment of Employee for Cause; provided, however, that, prior
to the termination of the Agreement for a basis set forth in Sections 7.3(ii) or
7.3(iii) above (which is capable of being cured), Employee shall be given notice
of the basis for termination by the Company and a reasonable opportunity to cure
such breach.
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7.4 Termination of Employment Other than for Cause, Death or
Disability.
(a) Termination. The Agreement may be terminated (i) by
the Company (in addition to termination pursuant to Sections 7.1, 7.2 or 7.3
above) at any time and for any reason, (ii) by the Employee at any time and for
any reason or (iii) upon the expiration of the Term.
(b) Severance and Non-Competition Payments.
(1) If the Agreement is terminated by the Company,
including by reason of a Constructive Termination (as defined below), other than
as a result of death or disability of Employee or for Cause (and other than in
connection with a change in control of the Company (as defined below)), the
Company shall pay Employee a severance and noncompetition payment equal to the
sum of (x) an amount equal to the Base Salary for the remainder of the Term plus
(y) an amount equal to the Bonus Compensation earned by the Employee in respect
of the last year immediately preceding the year of termination, multiplied by
the number of years remaining in the Term (including, in the case of a partial
year, the fraction of such year which is remaining); provided; however, that a
termination during the last twelve (12) months of the Term shall be governed by
Subsection 7.4(b)(5) below. Such severance and non-competition payment shall be
payable in equal monthly installments commencing on the first day of the month
following termination and shall continue for the remainder of the Term.
(2) For purposes of the Agreement, a "change in control
of the Company" shall be deemed to have occurred if (i) the Company shall have
merged or consolidated with an unaffiliated entity or the Company shall have
transferred or sold all or substantially all of its assets to an unaffiliated
entity, other than a transaction which is approved by Employee in his capacity
as a shareholder of the Company, or (ii) there shall be a change in the
constituency of a majority of the members of the Board within any twelve (12)
month period, other than a change which Employee voted in favor of in his
capacity as a shareholder of the Company.
(3) For purposes of the Agreement, a "Constructive
Termination" shall be deemed to have occurred upon (i) the removal of Employee
from or a failure of Employee to continue as Executive Vice President and Chief
Operating Officer of the Company, (ii) any material diminution in the nature or
scope of the authorities, powers, functions, duties or responsibilities attached
to such positions, or (iii) the material breach by the Company of the Agreement
if, in any such case, the Employee does not agree to such change and elects to
terminate his employment.
(4) In the event of a termination of employment by the
Company following a change in control of the Company (including by reason of a
Constructive Termination), the Company shall pay the Employee a severance and
non-competition payment
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equal to two (2) times the sum of the Base Salary plus the Bonus Compensation in
respect of the year immediately preceding the year of termination. Such
severance and non-competition payment shall be payable in a lump sum on the
first day of the month following the termination. In addition, all unvested Base
Stock Options which were granted prior to the date of termination shall be
deemed to have vested on the date of such change in control.
(5) If this Agreement is not renewed beyond the Term by
the parties hereto or if the Agreement is terminated by the Company (other than
as a result of death or disability of Employee or for Cause and other than in
connection with a change in control), including by reason of a Constructive
Termination, in accordance with this Section 7 during the last twelve (12)
months of the Term, the Company shall pay Employee a severance and
noncompetition payment equal to the sum of (x) an amount equal to the Base
Salary in respect of the year immediately preceding the year of termination plus
(y) an amount equal to the Bonus Compensation earned by Employee in respect of
the year immediately preceding the year of termination. Such severance and
non-competition payment shall be payable in twelve (12) equal monthly
installments commencing on the first day of the month following termination. In
addition, all unvested Base Stock Options shall be deemed to have vested on the
date of such termination.
(6) If Employee terminates his employment voluntarily
prior to the expiration of the Term, Employee shall be paid his unpaid Base
Salary (but no Bonus Compensation) through the date of such voluntary
termination.
(7) The Employee shall not be required to mitigate the
amount of any severance and non-competition payment provided for under the
Agreement by seeking other employment or otherwise.
8. Confidential Information.
8.1 The Employee agrees not to use, disclose or make
accessible to any other person, firm, partnership, corporation or any other
entity any Confidential Information (as defined below) pertaining to the
business of the Company or Valentec except (i) while employed by the Company or
Valentec, in the business of and for the benefit of the Company or Valentec or
(ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company or Valentec, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company or
Valentec to divulge, disclose or make accessible such information. For purposes
of the Agreement, "Confidential Information" shall mean non-public information
concerning the Company's or Valentec's financial data, statistical data,
strategic business plans, product development (or other proprietary product
data), customer and supplier lists, customer and supplier information,
information relating to governmental relations, discoveries, practices,
processes, methods, trade secrets, marketing plans and other non-public,
proprietary and confidential information of the Company or Valentec, that, in
any case, is not otherwise generally
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available to the public and has not been disclosed by the Company or Valentec to
others not subject to confidentiality agreements. In the event Employee's
employment is terminated hereunder for any reason, he immediately shall return
to the Company or Valentec all Confidential Information in his possession.
8.2 The Employee and the Company agree that the covenant
regarding confidential information contained in this Section 8 is a reasonable
covenant under the circumstances, and further agree that if, in the opinion of
any court of competent jurisdiction, such covenant is not reasonable in any
respect, such court shall have the right, power and authority to excise or
modify such provision or provisions of this covenant as to the court shall
appear not reasonable and to enforce the remainder of the covenant as so
amended. The Employee agrees that any breach of the covenant contained in this
Section 8 would irreparably injure the Company or Valentec, as the case may be.
Accordingly, the Employee agrees that the Company and/or Valentec, in addition
to pursuing any other remedies it may have in law or in equity, may obtain an
injunction against the Employee from any court having jurisdiction over the
matter, restraining any further violation of this Section 8.
8.3 The provisions of this Section 8 shall extend for the Term
and shall survive the termination of the Agreement for the greater of (x) the
period in which severance and non-competition payments are made pursuant to the
Agreement or (y) two years from the date the Agreement is terminated.
9. Non-Competition; Non-Solicitation.
9.1 The Employee agrees that, during the Non-Competition
Period (as defined in Section 9.4 below), without the prior written consent of
the Company or Valentec, as the case may be: (i) he shall not, directly or
indirectly, either as principal manager, agent, consultant, officer, director,
greater than two (2 %) percent holder of any class or series of equity
securities, partner, investor, lender or employee or in any other capacity,
carry on, be engaged in or have any financial interest in or otherwise be
connected with, any entity which is now or at the time, has material operations
which are engaged in any business activity competitive (directly or indirectly)
with the business of the Company (currently the manufacture and sale of (i)
automotive airbags and (ii) military ordnance products) or Valentec including,
for these purposes, any business in which, at the termination of his employment,
there was a bona fide intention on the part of the Company or Valentec to engage
in the future; and (ii) he shall not, on behalf of any competing entity,
directly or indirectly, have any dealings or contact with any suppliers or
customers of the Company or Valentec.
9.2 During the Non-Competition Period, Employee agrees that,
without the prior written consent of the Company or Valentec, as the case may
be, (and other than on behalf of the Company or Valentec), Employee shall not,
on his own behalf or on behalf of any person or entity, directly or indirectly
hire or solicit the employment of any employee who
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has been employed by the Company or Valentec at any time during the one (1) year
period immediately preceding such date of hiring or solicitation.
9.3 The Employee and the Company agree that the covenants of
non- competition and non-solicitation contained in this Section 9 are reasonable
covenants under the circumstances, and further agree that if, in the opinion of
any court of competent jurisdiction such covenants are not reasonable in any
respect, such court shall have the right, power and authority to excise or
modify such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as so
amended. The Employee agrees that any breach of the covenants contained in this
Section 9 would irreparably injure the Company or Valentec, as the case may be.
Accordingly, the Employee agrees that the Company, or Valentec, as the case may
be, in addition to pursuing any other remedies it may have in law or in equity,
may obtain an injunction against the Employee from any court having jurisdiction
over the matter, restraining any further violation of this Section 9.
9.4 The provisions of this Section 9 shall extend for the Term
and survive the termination of the Agreement for the greater of (x) one year
from the date of such termination and (y) the period in which severance and
non-competition payments are made to Employee pursuant to this Agreement (herein
referred to as the "Non-Competition Period").
10. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered
personally or sent by facsimile transmission, overnight courier, or certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or sent by facsimile transmission (provided
that a confirmation copy is sent by overnight courier), one day after deposit
with an overnight courier, or if mailed, five (5) days after the date of deposit
in the United States mails, as follows:
To the Company: Safety Components International, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
or to its principal executive offices as set forth on the cover page of its
latest filing with the Securities and Exchange Commission, if different.
To Employee: Xxxxxx X. Xxxxxxxx
0000 X. Xxxxxxxx
Xxxxxxxxxx, XX 00000
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or to such other address as is reflected in the Company's records as the
Employee's principal residence.
11. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the matters contemplated
herein and supersedes all prior agreements or understandings among the parties
related to such matters.
12. Binding Effect. Except as otherwise provided herein, the
Agreement shall be binding upon and inure to the benefit of the Company and its
successors and assigns and upon Employee. "Successors and assigns" shall mean,
in the case of the Company, any successor pursuant to a merger, consolidation,
or sale, or other transfer of all or substantially all of the assets or capital
stock of the Company.
13. No Assignment. Except as contemplated by Section 12 above,
the Agreement shall not be assignable or otherwise transferable by either party.
14. Amendment or Modification; Waiver. No provision of the
Agreement may be amended or waived unless such amendment or waiver is authorized
by the Board and is agreed to in writing, signed by Employee and by a duly
authorized officer of the Company. Except as otherwise specifically provided in
this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar provision
or condition at the same or at any prior or subsequent time.
15. Fees and Expenses. If either party institutes any action
or proceedings to enforce any rights the party has under this Agreement, or for
damages by reason of any alleged breach of any provision of this Agreement, or
for a declaration of each party's rights or obligations hereunder or to set
aside any provision hereof, or for any other judicial remedy, the prevailing
party shall be entitled to reimbursement from the other party for its costs and
expenses incurred thereby, including but not limited to, reasonable attorneys'
fees and disbursements.
16. Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the internal
laws of the State of Delaware, without regard to its conflicts of law rules.
17. Titles. Titles to the Sections in this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any Section.
18. Counterparts. This Agreement may be executed in one or
more counterparts, which together shall constitute one agreement. It shall not
be necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
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19. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and
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provisions of the Agreement or affecting the validity or enforceability of any
of the terms and provisions of the Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
-------------------------------------
Xxxxxx X. Xxxxxxxx
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